The International Energy Agency (IEA) on Tuesday trimmed its global oil demand forecast for this year as fresh COVID-19 lockdowns cloud the outlook, but said that mass vaccination programs should help bolster a second-half rebound.
“Global oil demand is expected to recover by 5.5 mb/d [million barrels per day] to 96.6 mb/d in 2021, following an unprecedented collapse of 8.8 mb/d in 2020,” the IEA said in its latest monthly report.
“For now, a resurgence in COVID-19 cases is slowing the rebound, but a widespread vaccination effort and an acceleration in economic activity is expected to spur stronger growth in the second half of the year,” it said.
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“This recovery mainly reflects the impact of fiscal and monetary support packages, as well as the effectiveness of steps to resolve the pandemic,” it added.
The IEA said that it now expected demand in the first quarter of this year to be 0.6 million barrels per day less than previously forecast, with the full-year outcome revised down by 0.3 million barrels per day.
On the supply side, the IEA said that after “falling by a record 6.6 mb/d in 2020, world oil supply is set to rise by over 1.0 mb/d this year.”
“There may be scope for higher growth given our expectations for further improvement in demand,” the IEA added.
It said that its forecasts assume that in the second half of this year, OPEC+ — OPEC members plus non-cartel producers, principally Russia — would continue to rein in output, withholding 5.8 million barrels per day of oil from the market in line with their agreement in April last year.
The IEA said that OPEC+ has recently adopted a more flexible stance and would be meeting regularly to assess output levels.
Oil prices have risen in recent weeks on hopes the global economy would get back on track later this year.
The IEA said these higher prices could “provide an incentive to increase production by the US shale industry, which saw the biggest fall in output last year.”
However, shale producers appear set to stick with promises to keep output largely flat so as not to jeopardize prices.
“If they stick to those plans, OPEC+ may start to reclaim the market share it has steadily lost to the US and others since 2016,” the IEA said.
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